LIHU'E, Kaua'i—Kaua'i's economy is booming, but residents are also suffering the effects of that strength in the form of high housing prices and clogged streets, according to economist Leroy Laney.

Laney, a consultant to First Hawaiian Bank and economics and finance professor at Hawai'i Pacific University, spoke last night at the bank's 31st Annual Kaua'i Business Outlook Forum at the Princeville Hotel.

He said the island's unemployment is low, and businesses are having trouble finding workers. Meanwhile, high housing prices and the high cost of living otherwise are preventing workers from coming in from elsewhere.

"Kaua'i's heated economy has been creating jobs over the last several years faster than the state, but the labor supply constraint is apparent here also. In the first half of this year, job growth slowed to 3.1 percent after last year's 3.9 percent pace," Laney said.

Kaua'i's unemployment rate of 2.5 percent in August was the lowest in the state.

Laney said the island's tourism industry is changing, with traffic shifting from traditional hotels to people who arrive via cruise ship and those who plan to stay in time share apartments and vacation rentals. There are more independent travelers and they have more activities — notably physical activities like ziplines, all-terrain vehicle experiences and expanded golf. Romance tourism is also a bigger part of the market, he said.

Tourism growth at 2.1 percent for the first half of this year doesn't look too strong, but it builds on an extended period of growth.

"Both Kaua'i and Maui have enjoyed strength for a longer time and big gains are harder to come by," he said.

With increased business comes traffic, and Laney said residents report frustration with congestion on the island's main belt highway, and the appearance that any solution is years off.

"Lost time to residents and a negative impression on visitors are both important," he said.

While tourism is a big force in the local economy, construction and development are perhaps a bigger, with more than 2,000 homes or homesites planned in the next couple of years at Po'ipu and the Lihu'e area, and a stunning 11,000 units of residential and resort property in 46 projects planned over the next 5 years islandwide.

"The Kaua'i construction industry will be booming for some years to come," Laney said. But that isn't necessarily good for everyone.

"The median price of a single family home on Kaua'i was $600,000 in the first half of the year, up 29 percent from the same period in 2004. ... One wonders about the future of an economy in which those who make it run can't afford to relocate or stay here," Laney said.

He predicted a setback for the housing market's growth: "Eventually affordability will bring the current real estate cycle to an end, hopefully with a soft landing."

A number of changes in ownership or brand are playing roles in the market, including the sale of the Princeville resort community to developer Jeff Stone, the sale of the island's largest shopping center at Kukui Grove, the rebranding of the Hyatt Kaua'i Regency to the Grand Hyatt Resort and Spa, the reopening of the old Coconut Beach Hotel as a Courtyard Marriott, and the redevelopment of the old Coco Palms Hotel.

One of the newer features in the island's agriculture industry, Laney said, is the incorporation of tourism aspects, including tours of agricultural fields, factories and gardens. Another is developing new products from agricultural materials, like Gay & Robinson's proposal to produce ethanol fuel from cane waste.

Reach Jan TenBruggencate at jant@honoluluadvertiser.com.